Angola’s currency fell the most since September 2001 after the central bank allowed it to devalue as the drop in oil prices cut the main source of government revenue and export earnings.
The kwanza slid as much as 17 percent to an all-time low of 158.7380 against the dollar and was at 154.2659 as of 5:42 p.m. in the capital, Luanda. The drop followed a 24 percent retreat in 2015, its eighth year of declines and the most since 2003, according to data compiled by Bloomberg. The kwanza was sold at
an average rate of 156.386 last week compared with 135.988 a week earlier, the Luanda-based National Bank of Angola said on its website on Dec. 31. That’s the biggest single devaluation since policy makers started cutting the currency’s exchange rate in several moves during the course of 2015, which Eurasia Group estimates amounted to 25 percent before the latest reduction.
Central bank Governor Jose Pedro de Morais is trying to reduce the gap between the kwanza’s official rate and that on the black market, where the currency was last year fetching between 270 and 280 per dollar. A drop of more than 65 percent in the price of crude since June 2014 has curtailed the flow of dollars into the economy of sub-Saharan Africa’s second-largest oil producer.
“The devaluation, besides placing the kwanza in accordance with the fundamentals of economy, also has the advantage of promoting national production,” Carlo Rosado de Carvalho, an economics professor at Catholic University in Luanda, said by phone. “From this point of view it makes sense to devalue.”
The central bank, known as the BNA, started managing foreign-exchange sales by commercial lenders to businesses in November as a response to the limited supplies of U.S. currency. The policies leave companies at the mercy of the central bank’s view on which sectors need dollars the most, driving many to the black market, Jose Severino, chairman of the Angola Industrial Association, or AIA, which has 2,100 members, said in December.
“The issue with the administrative exchange rate is that some people were benefiting the most from being able to buy dollars at an artificially lower rate,” De Carvalho said. A weaker exchange rate would protect domestic producers against imports without a need for “administrative barriers like tariffs and quotas,” he said